Demand for office space down in Chennai

Chennai

The office market in Chennai witnessed an overall absorption of less than 1 million sq ft during the first quarter this year. The Central Business District (CBD) encompassing areas of Anna Salai, T Nagar, RK Salai, Alwarpet, Nungambakkam witnessed a dip in demand for office space with negligible absorption of around 0.09 million sq ft being reported in the present quarter, largely in smaller and medium format office spaces.

However, due to negligible supply addition rental values firmed up by about 2-3% on a quarter over quarter basis, according to the first quarter report by CB Richard Ellis.

The Off/Non CBD micro-market of MRC Nagar, Guindy and Taramani witnessed stagnation in market activity when compared to the previous quarter. Absorption was recorded at around 0.16 million sq ft. However rental values witnessed a marginal increase of 4-5% on a q-o-q basis, primarily due to low supply pressures when compared to the suburban micro-markets.

A nominal supply of 0.08 million sq ft was released; vacancy level was in the range of 3 – 4%. The Suburban Business District (SBD) including areas such as Velachery, Perungudi, Mount Poonamallee Road witnessed maximum activity during this quarter with an absorption of almost 0.32 million sq ft being reported, compared to around 0.25 million sq ft in the previous quarter.

On the supply side, no significant additions were witnessed during the review period. Rental values increased by about 5-8% on a quarter on quarter basis; vacancy level was around 7 – 8% in the present quarter.

The Peripheral Business District (PBD) of Perungalathur, Sholinganallur, Siruseri, Ambattur and GST Road witnessed minimal activity with absorption of only around 0.08 million sq ft, compared to around 0.45 million sq ft in the previous quarter. The region witnessed an addition of around 0.72 million sq ft of fresh IT space, the only major supply addition in the city during the review period. Supply pressures and stagnating demand led to a downward pressure being created on rental values and a steep increment in vacancy levels to around 18-20% in the present quarter.

Market Outlook

The overall market sentiment, however, continues to remain positive which is expected to translate into healthy absorption over the coming few quarters. The SEZ segment should continue to witness supply addition, thereby being a major contributor to the office market in the city. IT and back-office operations are expected to continue to remain major contributors to office demand and transaction activity. Rental values are expected to remain largely stable across most micro-markets over the coming few quarters.

V Nagarajan, Property Consultant

Source: http://content.magicbricks.com/demand-for-office-space-down-in-chennai

Chennai office space sale sees a hike

With the absorption of 4.5 million sq ft during last year and unheard of large scale absorption, the city is gearing up for second and third level of growth for IT industry.

Chennai has witnessed an absorption level of 4.5 million sq ft office space during last year. Unlike earlier, the city has notched up some of the large scale office space absorptions ranging from 300,000 sq ft to 500,000 sq ft which was not witnessed earlier, according to industry experts.

A number of corporates and MNCs are in consolidation mode as they are looking for expansion of their existing requirements. The city is gearing up for built to suit (BTS) requirements that are likely to emerge in the coming months as a result of the surge in corporate demand.

The Central Business District (CBD) encompassing areas of Anna Salai, T Nagar, R.K. Salai, Alwarpet, and Nungambakkam witnessed an increase in demand for office space, largely in the small and medium format office spaces, with the absorption recorded at around 0.17 million sqft during the fourth quarter last year. No new supply was released into this micro-market and rental values also remained stable.

Vacancy level was estimated at a low of 1-2%. The off – Non CBD micro-market of MRC Nagar, Guindy and Taramani witnessed limited transaction activity with the absorption recorded at around 0.28 million sq ft. No new supply was released in this micro-market.

The Suburban Business District (SBD) including areas such as Velachery, Perungudi, Mount Poonamallee Road witnessed absorption of almost 0.25 million sq ft of IT/IT SEZ space, even as supply of almost 0.7 million sq ft of IT SEZ space was added to the existing stock.

Rental values appreciated marginally by 2-3% in select developments, but were largely stable in the rest of the micro-market. A marginal increment was witnessed in vacancy level, which stood at around 7 – 8% in the fourth quarter last year.

The Peripheral Business District (PBD) of Perungalathur, Sholinganallur, Siruseri, Ambattur and GST Road witnessed encouraging transaction velocity as compared to other micro-markets. Rental values remained largely stable, even as new supply influx led to a marginal increase in vacancy levels. Vacancy remained high at around 18-20% in this micro-market.

Market Outlook

Rental values in most of the micro-markets are expected to remain stable; CBD values are expected to appreciate in the near term due to enhanced demand and lack of ready to occupy space. A majority of office demand would continue to be led by IT/ITeS occupiers, even as tilt in absorption towards SEZ developments might be experienced, according to CB Richard Ellis.

Source: http://content.magicbricks.com/chennai-office-space-sale-sees-a-hike